Hospital systems’ health plan: Will the idea work this time around?

In the mid-1990s, a metro Atlanta hospital system launched a health insurance plan with a goal of attracting enrollment by local companies and residents.

But things did not go as hoped. Promina Health System’s insurance plan eventually failed, and the organization lost tens of millions of dollars in the process. That setback helped lead to the ultimate breakup of Promina.

Now, two former players in Promina – Piedmont Healthcare and WellStar Health System – have started a health insurance product of their own. Officials in charge say they aim to make health coverage more affordable to businesses and individuals.

The Piedmont WellStar HealthPlans, which just named its leadership team, will begin offering coverage Oct. 1 for the 2014 plan year.

It will start out with 35,000 members – employees of the nonprofit Piedmont and WellStar systems and their dependents. The health plan is also seeking to offer coverage to employers with 50 or more employees, as well as a Medicare Advantage plan.

Using a kind of medical home model, “we’re going to improve care,“ Dan Styf, senior vice president of operations at Piedmont WellStar HealthPlans, told GHN this week. “We fully expect to improve affordability of coverage.’’

A medical home, in industry parlance, is a practice that uses doctors, nurses and other medical professionals to manage an individual patient’s total needs, working to improve or maintain the person’s health.

Experiments in better care

The marriage of hospital organizations and insurance is just one of many major changes shaking up the health care industry in Georgia and nationally.

More hospital systems are looking to offer insurance products, with several doing it through acquisition. Catholic Health Initiatives, with more than six dozen hospitals in 17 states, acquired the majority stake in an insurer in Washington state. The Detroit Medical Center and Partners HealthCare also acquired insurers.

The Affordable Care Act – the 2010 federal health care law that is now close to being fully implemented – is driving many of the changes. It is switching the way medical providers are paid to a system based on quality of services, not quantity, and spurring hospital and doctor consolidation in an effort to reduce costs.

And more changes will come with the pending rollout of the ACA’s health insurance exchanges, and with the federally subsidized expansion of Medicaid in some individual states. (Georgia is one of several states that have chosen not to expand Medicaid.)

“There’s a flurry of activity right now,’’ says Greg Charleston, with consulting firm Conway MacKenzie in Atlanta. “No one wants to miss the boat. But I’m not sure anyone knows what the boat is.’’

Charleston says that “on paper,’’ the Piedmont WellStar insurance offering “makes a lot of sense,’’ with the two systems being major players in metro Atlanta. But he cautions that “insurance is totally different from delivery of services. There’s a lot of execution risk.’’

Together, the two systems operate 2,393 beds in 10 hospitals and have more than 2,000 affiliated physicians.

Piedmont has hospitals in the cities of Fayetteville, Newnan and Stockbridge in southern metro Atlanta, and in the town of Jasper in the North Georgia mountains, as well as its flagship Buckhead facility in the city of Atlanta. WellStar dominates the Cobb, Douglas and Paulding county areas in northwestern and western metro Atlanta.

The two systems’ combined footprint covers two-thirds of the Atlanta area, Styf says. “We’re not going to be in a small niche.’’

Businesses, Styf says, “would just as soon as work with a local system.’’

Technology seen as key

Doubts have been voiced by the Georgia Association of Health Plans, an industry trade group, which last year noted that it may be difficult for Piedmont and WellStar to cover the whole Atlanta area. Large employers have workers all over the region, said Graham Thompson, executive director of the health plan group, when Piedmont and WellStar announced their insurance partnership in December.

And he wondered aloud whether Piedmont’s and WellStar’s relationships with traditional insurers will change once the hospital systems’ health plan is competing with those companies.

Piedmont WellStar is not starting out providing coverage in the state’s health insurance exchange, nor with small group or individual policies.

Styf says the new insurance plan has a big asset that Promina lacked: 21st-century record-keeping.

Piedmont WellStar’s electronic medical record system will bring data to clinical staff “that will make our members healthier and avoid unnecessary ER visits and hospitalizations,’’ he says.

“The computing ability and technology required to bring that knowledge to frontline clinical staff did not exist in the 1990s,’’ Styf says. “Unlike the Promina venture, we are leveraging the administrative systems of a world-class provider-sponsored health plan – UPMC Health Plan – on our customers’ behalf.’’

The Piedmont WellStar health plan resembles a classic HMO that seeks to keep people healthier and reduce expenditures, says Bill Custer, a health insurance expert at Georgia State University.

“Only a few systems are big enough to do this,” he says.

One limitation of this health plan is that it offers just one set of medical providers, Custer adds.

Styf of Piedmont WellStar says a major advantage is that the new health plan won’t be shifting revenues to shareholders of for-profit insurance companies, as its competitors do. “We’ll return more of that revenue to the community,’’ Styf says.

“This is about the future of primary care,’’ he says. “I think it will make a big difference in our community.’’